US: E-cig sales Continue to Rebound with FDA Regulations Looming

Source from:  Winston-Salem Journal 06/30/2016

Electronic cigarettes, led by the Vuse and MarkTen brands, continued their recent uptick in sales even as potential federal regulations loom in August.

Nielsen data found that e-cig sales rose 12.9 percent over the four weeks ending June 18.

Vuse, made by R.J. Reynolds Vapor Co., remained, first with a 35.7 percent market share, down 0.4 percentage points, followed by ITG Brands LLC's blu eCigs at 19.3 percent.

MarkTen, made by NuMark, a subsidiary of Philip Morris USA, jumped to a third-place share of 16.3 percent, likely based on "intense couponing" for its XL style, according to Bonnie Herzog, an analyst with Wells Fargo Securities.

Nielsen data tracks the mass-channel and convenience-store marketplace. Vaporizers, which typically are lower in price, are sold mostly in tobacco and vapor shops where Nielsen has limited tracking.

The U.S. Food and Drug Administration released on May 5 its final regulations for innovative smokeless tobacco and nicotine products. The rules are projected to go into effect Aug. 8.

Products introduced into the marketplace after Feb. 15, 2007 - including almost every e-cig and vaporizer - would have to retroactively go through stiffer regulatory requirements o prove that they don't cause public harm. That includes providing more details about liquid-nicotine ingredients and about manufacturing.

The FDA's decision to stick with that predicate date for product introductions has spurred at least six lawsuits attempting to gain an injunction on implementing the restrictions.

The most prominent lawsuit to date comes from the Right to be Smoke-Free Coalition, representing 10 advocacy and trade associations. The coalition wants the regulations declared unlawful on constitutional and administrative grounds.

Herzog, the Wells Fargo tobacco analyst, is projecting $4.1 billion overall in 2016 e-cig sales: $2.5 billion in vapors, tanks, mods and personal vaporizers, and $1.6 billion from e-cigs.

As for data about the market for traditional cigarettes, the acquisition of the Newport brand continues to propel Reynolds American Inc.'s sales surge past its chief rivals.

Herzog said Reynolds overall had a 3.7 percent increase in traditional cigarette sales, compared with 2.3 percent for the industry, in the four weeks ending June 18. Most of the revenue reflects recent list-price increases by the Big Three manufacturers that distributors typically pass on to consumers.

Newport, the top-selling U.S. menthol brand and No. 2 overall, again had the largest sales increase of top cigarette brands, up 5.7 percent over a 12-week period and 5.5 percent over June 2015.

The sharp rise has been seen ever since Reynolds acquired Newport in its $29.25 billion deal for Lorillard Inc. of Greensboro on June 12, 2015.

Sales of Camel, the No. 3 U.S. cigarette brand, rose 0.3 percent, while super-premium brand Natural American Spirit, a recent entrant into the Top 10 nationally, jumped 22.3 percent.

Philip Morris USA's sales rose 1.8 percent during the period, with top-selling Marlboro up 1.6 percent. Marlboro's market share is 47 percent, down 0.3 percentage points over the period.

Herzog cautioned again that ITG Brands LLC continues to struggle to gain traction with the four cigarette brands - Kool, Maverick, Salem and Winston - that its parent company, Imperial Brands PLC, spent $7.1 billion to buy from Reynolds and Lorillard.

ITG sales were down 4.9 percent during the four-week period. ITG's market share was at 7 percent, down from 10 percent when it gained the brands. ITG officials have disputed Herzog's market share estimations, saying it is closer to 9.3 percent.

ITG acknowledged on April 22 that it is eliminating 375 production employees, or about one-third of that workforce, with a reciprocal production agreement with R.J. Reynolds Tobacco Co. that ended Friday. Enditem